We are a family of four with 2 kids a couple years away from school. We'll be using either private or home schooling, so school district is not a concern when considering where to live.

We are in the 15% tax bracket and deciding whether we'll continue to rent for the foreseeable future in a nice suburb, or purchase a house in a less safe neighborhood for the benefits of a yard to play in, additional bedroom (#3), and to build equity. Apartment rent is $1265 (2 bedroom) and has risen 43% over the past five years. Rent is 23% of gross income. The typical house we can afford is in a neighborhood with the following statistics:

Our current neighborhood literally doesn't even register on the chart for crime statistics, it's essentially unheard of. There aren't any middle ground neighborhoods. There are good cities and bad ones. All of the bad ones border a "war zone" city.

Perspective houses range from $100,000 for a dump to $145,000 for something newer or updated. They're selling like hotcakes. Investors own many of the homes, and there is high concentration of renters/section 8. Typical houses are 3 bedroom ranches around 1000 square feet with a basement and detached garage. Prices are much cheaper and the neighborhood declines in quality as you get closer to the edge of town that borders the very dangerous major city. We can afford a 10% down payment to move. Our current neighborhood has houses starting around $250,000, but they are rare and most houses are in the $300s+. A new Pulte Home development up the road is in the $400s. In 2011, new houses started at $99,000. Amazing how things have changed.

There is so much more to a neighborhood and house than statistics. Have you and your spouse visited the neighborhood at all different times/days of the week? Do you know others who live there, or any local police officers who can give you some on-the-ground data? I think this is a question that statistics can't answer for you. Do you and your family feel safe? Can the kids actually use the yard?

You have got to be kidding? Why would ANYONE want to live in a less safe area if they have kids and want them to play outside?

Who cares if you build equity in a house that may be hard to sell in the future. Real estate is not a difficult to figure out. What folks will want is: Safety, Good schools, close to public transport, and green space. That simple. So even if you don't care about safety or public schools it may come back to haunt you when you sell.

Now if you are trying to speculate which areas will gentrify during the time you buy to the time you sell that is a different situation. But buying in an area that is not safe and being okay is never a good idea for two adults let alone with kids. I would say even MORE if you are home schooling. If at home who are the kids going to socialize with? The kids in the area is the answer so where are they all going to play? The same unsafe area. Not a good choice.

Good luck.

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runner540 wrote:There is so much more to a neighborhood and house than statistics. Have you and your spouse visited the neighborhood at all different times/days of the week? Do you know others who live there, or any local police officers who can give you some on-the-ground data? I think this is a question that statistics can't answer for you. Do you and your family feel safe? Can the kids actually use the yard?

1. I suspect that some degree of crime statistics in some areas may not accurately reflect your actual risks.

2. The direction of the crime risk may be important. Maybe the applicable crime risks for you are getting better (or worse).

runner540 wrote:There is so much more to a neighborhood and house than statistics. Have you and your spouse visited the neighborhood at all different times/days of the week? Do you know others who live there, or any local police officers who can give you some on-the-ground data? I think this is a question that statistics can't answer for you. Do you and your family feel safe? Can the kids actually use the yard?

1. I suspect that some degree of crime statistics in some areas may not accurately reflect your actual risks.

2. The direction of the crime risk may be important. Maybe the applicable crime risks for you are getting better (or worse).

3. Can you find way(s) to buy in the existing "safe" neighborhood?

We know families that have lived there for decades. It was a nice quiet suburb in the 1960s. Mostly retirees that we know, or nearing retirement. Though many of them have had no issues, they still live there advise they would avoid buying in the area. The housing crash and investors are mostly blamed, since they bought rentals for cash when the banks were unloading houses for $20k each. This lowered the barrier for residents of the neighboring "war zone" to move in and rent or buy as well. An uncle of mine had a nice house on one of the nicest streets, bordering a very nice suburb. It sold for $145,000 in just 4 hours on the market 2 years ago.

We can't afford to buy in our area if we want to live beneath our means.

In my area, people who cannot afford desirable real estate, historically have moved farther out to more outlying areas. In such areas one can find decent housing that is more affordable. Perhaps this might work for you.

kjvmartin wrote:We are a family of four with 2 kids a couple years away from school. We'll be using either private or home schooling, so school district is not a concern when considering where to live.

We are in the 15% tax bracket and deciding whether we'll continue to rent for the foreseeable future in a nice suburb, or purchase a house in a less safe neighborhood for the benefits of a yard to play in, additional bedroom (#3), and to build equity. Apartment rent is $1265 (2 bedroom) and has risen 43% over the past five years. Rent is 23% of gross income. The typical house we can afford is in a neighborhood with the following statistics:

Our current neighborhood literally doesn't even register on the chart for crime statistics, it's essentially unheard of. There aren't any middle ground neighborhoods. There are good cities and bad ones. All of the bad ones border a "war zone" city.

Perspective houses range from $100,000 for a dump to $145,000 for something newer or updated. They're selling like hotcakes. Investors own many of the homes, and there is high concentration of renters/section 8. Typical houses are 3 bedroom ranches around 1000 square feet with a basement and detached garage. Prices are much cheaper and the neighborhood declines in quality as you get closer to the edge of town that borders the very dangerous major city. We can afford a 10% down payment to move. Our current neighborhood has houses starting around $250,000, but they are rare and most houses are in the $300s+. A new Pulte Home development up the road is in the $400s. In 2011, new houses started at $99,000. Amazing how things have changed.

Thoughts?

I thought about downsizing to an area with a crime rate of 57 (1 being the safest) The area you described is a lot more dangerous. I don't think I would do it. I notice a lot of difference going to the 57 area from a suburb. In my case it would be 1/6 the price for a smaller house. Even with this big savings I am treading slowly.

Last edited by rec7 on Sat Jul 15, 2017 4:25 pm, edited 2 times in total.

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kjvmartin wrote:Our current neighborhood has houses starting around $250,000, but they are rare ....

But they exist. If you have all your loan pre-approvals in order then when one comes on the market you can jump on it.

One problem with a house in the high crime neighborhood is that they may be selling well now when the housing market is hot but eventually things will cool off and you might have to sell it some day when the housing market is bad.

I did not crunch the numbers but it sounds like the mortage on a $250K house would be in the same balpark as what you are paying for the apartment so buying a $250K house in the safe neighborhood would be an option.

kjvmartin wrote:Our current neighborhood has houses starting around $250,000, but they are rare ....

But they exist. If you have all your loan pre-approvals in order then when one comes on the market you can jump on it.

One problem with a house in the high crime neighborhood is that they may be selling well now when the housing market is hot but eventually things will cool off and you might have to sell it some day when the housing market is bad.

I did not crunch the numbers but it sounds like the mortage on a $250K house would be in the same balpark as what you are paying for the apartment so buying a $250K house in the safe neighborhood would be an option.

You'd recommend a 250k house for 65-75k of income? The thing is, our modest apartment has gone from pleasantly affordable ($730) to kind of beyond what we're comfortable with ($1245). The $250k house, I could technically get a mortgage for it (I am already pre approved for that amount), but I am not sure how sustainable it is. With 5% down it's about $1400 a month. With maintenance, I'm not sure how wise this. I'm also not sure I could break out of the standard deduction enough to make a meaningful impact on my taxes. I have the option to break my lease for $500 and could have a $250k house within a month if I really wanted, but I'm not sure if that's the best course of action for long term financial goals. If you go by 2.5x income, the most house I should buy is about 160k-190k, right? There isn't anything in that range. There's 140k in the crummy area or $250k+ in suburbia. We're on 1 income for I don't know how long, we have a healthy 5 month old and a 3 year old who has special needs which we're still navigating the ins and outs on, it takes up a lot of time. It's sort of up in the air what kind of income my wife will be able to bring in going forward. She'll be going back as a contingent RN soon, but on that income it still puts us in the $210-$220 maximum range.

You have had a lot of good replies, and sorry but you have to get rid of the "whining" factor in your thinking. Life and neighborhoods and prices are what they are. There is not a housing bubble.

2.5x income is no longer realistic in some areas. Yes, if you can get that $250 k house in your good neighborhood, do the 5% down and grab it, it will be going to $275 and you will then be hoping for a drop in the real estate market and your life will still be facing rent increases!

Just buy the house already. It will work out, you can skimp in other areas, don't overthink this decision. It is patently clear that you should not look for a cheaper house. You can't buy anything decent in most parts of the country for $200k. . Buy a new house if you can, less maintenance, but if not buy a used one. I think fixer uppers are usually overpriced for what it really will cost you to upgrade. Buying new or near new makes your expenses more predictable, even if the price is higher, it will always sell higher.

I suggest you take action this month and buy in your good neighborhood.

Ignore the 2.5x income or 3x income nonsense, look instead at expected annual costs to rent vs own, what you can afford to pay per month for housing, as well as a good rent vs buy calculator. I like this one: http://michaelbluejay.com/house/rentvsbuy.html

I wouldn't buy a house in a neighborhood I thought was unsafe. Keep shopping for rent or purchase opportunities in nicer neighborhoods, keeping an eye on what you can afford per month and the calculators results on rent vs buy costs under either option.

4nwestsaylng wrote:You have had a lot of good replies, and sorry but you have to get rid of the "whining" factor in your thinking. Life and neighborhoods and prices are what they are. There is not a housing bubble.

2.5x income is no longer realistic in some areas. Yes, if you can get that $250 k house in your good neighborhood, do the 5% down and grab it, it will be going to $275 and you will then be hoping for a drop in the real estate market and your life will still be facing rent increases!

Just buy the house already. It will work out, you can skimp in other areas, don't overthink this decision. It is patently clear that you should not look for a cheaper house. You can't buy anything decent in most parts of the country for $200k. . Buy a new house if you can, less maintenance, but if not buy a used one. I think fixer uppers are usually overpriced for what it really will cost you to upgrade. Buying new or near new makes your expenses more predictable, even if the price is higher, it will always sell higher.

I suggest you take action this month and buy in your good neighborhood.

I'm not whining, but I appreciate your suggestion regarding my thinking. I considered f the 2.5 x income as a hard & fast rule for real estate, and so I was looking for thoughts from people who might have faced similar situations. Over the last few years, I have made a lot of steps to get finances in better order and I'm happily debt free and in a pretty good place with everything but real estate/living arrangements. We've been starting a family and saving a down payment as best we can. Without fail, all of the wisdom about buying a house says never to buy "the most house you qualify for" but that seems to be about the only option available in this economy. This doesn't seem to bode well.. And how do you know this isn't another housing bubble?

We lived in a bad area for a couple of decades. I can't remember how many times I woke to the sound of gunfire. In the time we were there it got worse over time (but is kinda sorta starting to improve).

FWIW, what would worry me the most is the high percentage of absentee landlords and section 8. We were lucky in that, with a couple of temporary exceptions, our immediate neighbors - say a 200 yd radius - were owner occupied, by nice people. Mostly older, who had moved there before it went south. It's one thing to have a higher rate of burglaries in your zip code, and it's another to have a crack house next door.

We moved to a nice town when we retired. It's a wonderful improvement. We're thankful every single day. That said, people have been homesteading dangerous frontiers for a long time, even with kids. Sometimes you do what you must.

If this is the Detroit area or someplace similar, have you considered a major relocation to some growing LCOL area?

I think one may need to look at the crime rate carefully to see whether most are violent crimes or non-violent crimes. For example, one of the most expensive areas around here actually has a relatively high crime rate compare to residential neighborhood as it is near the restaurant and bar areas, so there are more property crimes. Then I remember you are in law enforcement (corrections officer) so you probably know all about this.

student wrote:I think one may need to look at the crime rate carefully to see whether most are violent crimes or non-violent crimes. For example, one of the most expensive areas around here actually has a relatively high crime rate compare to residential neighborhood as it is near the restaurant and bar areas, so there are more property crimes. Then I remember you are in law enforcement (corrections officer) so you probably know all about this.

Kind of amazing there are no reported sexual assaults.

Are there no other neighborhoods? I would not buy in an area where there were unusual safety concerns.

Personally, I wouldn't buy in a less safe neighborhood because it's such a huge hit on lifestyle and also has other risks. I'd constantly be worried about the kids and also the investment. What if the neighborhood continues to decline and you want/need to sell and get out? That said, have you thought about a weighted evaluation of various options? My wife and I did one when we downsized from home to condo and it seemed to really solidify what we were feeling at a gut level. Sometimes you already know the answer but get into a situation of analysis paralysis.

Do not buy in an unsafe area, it will not get better quick enough. Seriously, look into purchasing in a good neighborhood, even if it is the worst eyesore on the block, you can fix it over time.

A safer neighborhood will have generally have safe parks, a good neighborhood may have resources for your child that other areas may not (look into that). A safer neighborhood may have a better school system. Home school is the plan, but plans can change, if they do it may not be so easy to sell your home in a less safe neighborhood.

I'd advise not purchasing in that area, as your acquaintances who live there also recommend. The most likely eventuality, unfortunately, is that the neighborhood will become part of the "war zone." Then where will you be? Seen it happen, to my hometown. My one remaining relative who lived there (in a nice house in what was once a lovely old neighborhood) packed up and left after a bullet crashed through his bedroom window.

If you're comfortable telling us what city, someone might be able to give you very specific helpful advice. I don't know jack about real estate but I find it surprising that there isn't any neighborhood between unaffordable and dangerous.

4nwestsaylng wrote:You have had a lot of good replies, and sorry but you have to get rid of the "whining" factor in your thinking. Life and neighborhoods and prices are what they are. There is not a housing bubble.

2.5x income is no longer realistic in some areas. Yes, if you can get that $250 k house in your good neighborhood, do the 5% down and grab it, it will be going to $275 and you will then be hoping for a drop in the real estate market and your life will still be facing rent increases!

Just buy the house already. It will work out, you can skimp in other areas, don't overthink this decision. It is patently clear that you should not look for a cheaper house. You can't buy anything decent in most parts of the country for $200k. . Buy a new house if you can, less maintenance, but if not buy a used one. I think fixer uppers are usually overpriced for what it really will cost you to upgrade. Buying new or near new makes your expenses more predictable, even if the price is higher, it will always sell higher.

I suggest you take action this month and buy in your good neighborhood.

I'm not whining, but I appreciate your suggestion regarding my thinking. I considered f the 2.5 x income as a hard & fast rule for real estate, and so I was looking for thoughts from people who might have faced similar situations. Over the last few years, I have made a lot of steps to get finances in better order and I'm happily debt free and in a pretty good place with everything but real estate/living arrangements. We've been starting a family and saving a down payment as best we can. Without fail, all of the wisdom about buying a house says never to buy "the most house you qualify for" but that seems to be about the only option available in this economy. This doesn't seem to bode well.. And how do you know this isn't another housing bubble?

I thought it was 3x, but agree it doesn't apply everywhere. In CA I could get a REALLY nice closet for 2.5-3x income.

Not a bubble by any means. Even in ridiculous Bay Area, not a bubble unless the tech industry goes bust, and the Zuckerbergs and others lose all their money. Those folks are paying cash for those homes, so high as the prices are, these people in tech largely are paying out of stock profits. Sad but true.

Even if a small bubble, if you plan to stay a long time it is no problem unless you lose your job. At some point you have to be optimistic that things will work out. One thing is for sure, rents are not going to drop, whether you have a job or not.

If you can pay ten percent down ($25k) that would be ideal,otherwise pay the 5 percent down, you know what your payments are going to be.
Believe me, 250K is not bubble territory in a good neighborhood.

I fear that by the time you get up the courage to move forward, prices will be up to 275-300 and then you will really be unsure. Buy now, if the prices then rise to 300k and drop back worst case, to 225K, you are still in good shape. You know, unlike a stock, you don't wake up one morning and find your house is down by 20 percent that morning and dropping by the hour.

Let us know what you do. I say put an offer on the house next week and settle in before Fall.It will feel great to give notice to your landlord.

newbie_Mo wrote:If you buy in the dangeous neighborhood, who will your kids be hangout with? Kids learn from their peers.

If you cannot afford a 250k house, how do you afford to send your kids to private school?

This is what I would be concerned about. Your children are young now, but in a few years will be playing with friends in the neighborhood. Since it is not safe, the friends and their families may be less than desirable. Unless you believe that the area is on the way up and improving due to who is now moving in and purchasing.

runner540 wrote:There is so much more to a neighborhood and house than statistics. Have you and your spouse visited the neighborhood at all different times/days of the week? Do you know others who live there, or any local police officers who can give you some on-the-ground data? I think this is a question that statistics can't answer for you. Do you and your family feel safe? Can the kids actually use the yard?

1. I suspect that some degree of crime statistics in some areas may not accurately reflect your actual risks.

2. The direction of the crime risk may be important. Maybe the applicable crime risks for you are getting better (or worse).

3. Can you find way(s) to buy in the existing "safe" neighborhood?

We know families that have lived there for decades. It was a nice quiet suburb in the 1960s. Mostly retirees that we know, or nearing retirement. Though many of them have had no issues, they still live there advise they would avoid buying in the area. The housing crash and investors are mostly blamed, since they bought rentals for cash when the banks were unloading houses for $20k each. This lowered the barrier for residents of the neighboring "war zone" to move in and rent or buy as well. An uncle of mine had a nice house on one of the nicest streets, bordering a very nice suburb. It sold for $145,000 in just 4 hours on the market 2 years ago.

We can't afford to buy in our area if we want to live beneath our means.

I would not move my daily to an unsafe neighbourhood. Safer than 15 per cent of AmericAn cities? That's awful. And with investor buyers it sounds like it cannot gentrify.

If you can afford to live in a safe neighborhood as opposed to one that is not safe, do so. I would not let renting vs. buying make that decision by default.

However, consider carefully whether a neighborhood is actually safe or not. Sometimes statistics can be misleading. For instance, it often appears that some neighborhoods in Manhattan are unsafe because the statistics are based on the number of residents and the neighborhoods have a lot of business activity so there are many more people physically in the area every day than actually live there. Many of the reported crimes may be shoplifting, attempted use of stolen credit cards, and similar crimes that don't have such a direct effect on people who live in the neighborhood as other types of crime might have. Looking only at violent crime statistics might be more meaningful. You also shouldn't make certain conclusions about the crime rate in a neighborhood just because of who lives there or what it looks like. You might be surprised at the amount of crime in what looks like a safe, middle-class neighborhood.

But given the statistics you quoted for the neighborhood you can afford to buy in, renting looks like the better option.

Pajamas wrote:If you can afford to live in a safe neighborhood as opposed to one that is not safe, do so. I would not let renting vs. buying make that decision by default.

However, consider carefully whether a neighborhood is actually safe or not. Sometimes statistics can be misleading. For instance, it often appears that some neighborhoods in Manhattan are unsafe because the statistics are based on the number of residents and the neighborhoods have a lot of business activity so there are many more people physically in the area every day than actually live there. Many of the reported crimes may be shoplifting, attempted use of stolen credit cards, and similar crimes that don't have such a direct effect on people who live in the neighborhood as other types of crime might have. Looking only at violent crime statistics might be more meaningful. You also shouldn't make certain conclusions about the crime rate in a neighborhood just because of who lives there or what it looks like. You might be surprised at the amount of crime in what looks like a safe, middle-class neighborhood.

But given the statistics you quoted for the neighborhood you can afford to buy in, renting looks like the better option.

And NYC is an odd example for an American city. For one thing, it's much safer than its size would suggest. Something like 35th most dangerous metropolitan area-- and number one in size (or two after LA depending on how you define the area, I think). I think one is very unlikely to be murdered in New York, unless one goes looking for trouble or lives in a truly sketchy area (Brownsville, East Brooklyn, parts of the Bronx?).

Also you can cross the street and be in "bandit country". Not sure whether there's anywhere below top of Central Park that counts as bandit country now in Manhattan (maybe on the west side, down by the Hudson River, below about 60th?). But in Brooklyn say.

Given what OP is saying, this 'hood that he can afford to buy in is:

- really not very nice (worse than 85% of US districts)
- housing prices in the metropolitan district are truly low (is there a housing unit of any type, available for purchase in greater NYC, costing $140k? I believe in London we have now reached the point where there are no homes below £100k, as a comparison)
- dominated by investor buyers. They won't care about tenant quality or aesthetics. In other words, this is not a 'hood that will gentrify. This is not those parts of Washington DC that are within walking/ running distance of Capitol Hill but have been very run down and are now gentrifying madly

kjvmartin wrote:
We can't afford to buy in our area if we want to live beneath our means.

This sentence might be a key giveaway.

It's not wrong to stretch for the right location for a family, at the beginning of your lives (ie up to mid 30s, say). My parents did that, 50 years later they were still happily in situ (the neighbourhood only got better) having enjoyed the benefits of good schools and the local amenities, easy commute to work, for those 5 decades.

It's one thing to choose to live in a cheaper house (on a better street - location, location, location) or a perfectly decent middle class neighbourhood which has stable families and reasonable amenities, over a more expensive aspirational neighbourhood.

BUT this is a different choice. You are talking about a 'hood that could both be meaningfully dangerous for your family*, and which is unlikely to rapidly gentrify given landlord owners (who don't care about such things, they just want rent paid and lowest possible costs; many such owners have never even seen the properties they own, or only visited at purchase).

* much research suggests that your biggest impact on your kids, post about age 4, is not what you teach them at home, but what their playmates and schoolmates teach them about desirable behaviour, hard work etc. So the choice of who your kids play with is one of the most important choices you will make. You don't want a bunch of kids from unstable family backgrounds, possible substance abuse or domestic violence issues, etc.

kjvmartin wrote:You'd recommend a 250k house for 65-75k of income? The thing is, our modest apartment has gone from pleasantly affordable ($730) to kind of beyond what we're comfortable with ($1245). The $250k house, I could technically get a mortgage for it (I am already pre approved for that amount), but I am not sure how sustainable it is. With 5% down it's about $1400 a month. With maintenance, I'm not sure how wise this. I'm also not sure I could break out of the standard deduction enough to make a meaningful impact on my taxes. I have the option to break my lease for $500 and could have a $250k house within a month if I really wanted, but I'm not sure if that's the best course of action for long term financial goals. If you go by 2.5x income, the most house I should buy is about 160k-190k, right? There isn't anything in that range. There's 140k in the crummy area or $250k+ in suburbia. We're on 1 income for I don't know how long, we have a healthy 5 month old and a 3 year old who has special needs which we're still navigating the ins and outs on, it takes up a lot of time. It's sort of up in the air what kind of income my wife will be able to bring in going forward. She'll be going back as a contingent RN soon, but on that income it still puts us in the $210-$220 maximum range.

Until you figure out what sort of income your wife will be able to bring in renting would be a much better option.

That would also give you a chance to save up a larger down payment once your wife is working. Not that I would recommend it but one option to consider would be to rent a house in the high crime area to get an idea of what it is really like before you buy a house there.

I know that you are planning on private school or home schooling but with a special needs kid one thing to consider is that some public school districts are much better with special needs kids than others or even a typical private school. It would be good to research if there is a public school district that could provide him or her a good situation. If so then you might want to consider moving to that school district even if you have to relocate to a different city. Depending on the nature of the kids special needs I would be especially concerned about trying to raise him or her in the high crime area.

As others have mentioned it sounds unusual that the housing market is so polarized there with nothing in the middle. I would suspect that between the $145K house and the $250K house you could also find houses at any price point in between.

When you are crunching your numbers also be sure to consider the prices of your home and car insurance since it might be a lot more expensive in the high crime area and that could eat up some of your mortage payment savings.

The way that you are talking about a "war zone" city being withing a short drive of any of the locations you are thinking about raises the question of why you don't consider moving to a different area altogether. If you have family that you want to stay near then there might be some small city a two hour drive away from where you are at now where you could find a job and settledown but still be close enough to the visit relatives with a day trip.

4nwestsaylng wrote:Not a bubble by any means. Even in ridiculous Bay Area, not a bubble unless the tech industry goes bust, and the Zuckerbergs and others lose all their money. Those folks are paying cash for those homes, so high as the prices are, these people in tech largely are paying out of stock profits.

That is the type of “bubble talk” that you hear during a bubble. The tops of bubbles are impossible to predict but the Bay Area pricing is pretty clearly in a bubble fueled by easy money. The stock market is pretty much at an all time high and mortgage interest rates are still near historic lows. When either of those end it will not be pretty.

While some people do pay cash for a home there is it less common than you might be assuming. You can look up the percent of homes that don't have a mortgage on the census web site. For example in Sunnyvale, where I once lived, only about a third of the homes don't have a mortgage. That is not much different than the national average.

Something to remember is that when people make a "cash" offer to buy a house what that really means is they are making an offer without a financing contingency that would allow them to get their earnest money back if they can't get a mortgage. They are still free to get a mortgage and even if they pay cash when the house sales closes they may still get a mortgage a month latter.

Valuethinker wrote:is there a housing unit of any type, available for purchase in greater NYC, costing $140k?

Sure, there are plenty of studios and one bedrooms available in the outer boroughs and in New Jersey for under $100k. They are usually not in the most desirable neighborhoods, usually are not in doorman buildings, may not be close to the subway, may have relatively high maintenance charges compared to the price, etc. But they certainly exist. When you hear about the crazy high prices in NYC, it is usually referring to Manhattan below Harlem and parts of Brooklyn.

This map is out of date but is still generally valid as far as relative values:

kjvmartin wrote:Is it bad to hope for another housing bubble to burst?

I wouldn't count on it or even bet on it. Sounds like you're in a tough spot. How stable is your job? I'm thinking if push comes to shove, it's better to take financial risk over physical risk. There's risk the rental cost will continue to rise. One thing about a fixed interest rate mortgage is that while it's more difficult to at the start, if you're able to manage at the beginning, it usually gets better over time. So, if you're in it for the long run, like if you can see the kids attending school in your current neighborhood, then it's worth considering what your maximum comfort zone for a mortgage. How much do you have for a down payment and closing costs?

This is market timing, but I wouldn't bet on low long term rates in 5 years. Between now and 5 years from now, I expect fixed 30 year mortgages to rise significantly. But I could be wrong.

student wrote:I think one may need to look at the crime rate carefully to see whether most are violent crimes or non-violent crimes. For example, one of the most expensive areas around here actually has a relatively high crime rate compare to residential neighborhood as it is near the restaurant and bar areas, so there are more property crimes. Then I remember you are in law enforcement (corrections officer) so you probably know all about this.

If this is the case, then voluntarily moving your family into a high-crime area is a reckless decision imo.

Valuethinker wrote:is there a housing unit of any type, available for purchase in greater NYC, costing $140k?

Sure, there are plenty of studios and one bedrooms available in the outer boroughs and in New Jersey for under $100k. They are usually not in the most desirable neighborhoods, usually are not in doorman buildings, may not be close to the subway, may have relatively high maintenance charges compared to the price, etc. But they certainly exist. When you hear about the crazy high prices in NYC, it is usually referring to Manhattan below Harlem and parts of Brooklyn.

This map is out of date but is still generally valid as far as relative values:

Thank you. Wow. London I am pretty sure there is nothing for less than USD 100k, and not even GBP 100k (say USD 130k, less these days).

There was a broom closet of an apartment, about 50 square feet, sold in 1989 for £60k-- the absolute peak of that cycle. A few years ago, I think it sold for around £120k, and could well be 150-200k now. (good location though, ).

4nwestsaylng wrote:Not a bubble by any means. Even in ridiculous Bay Area, not a bubble unless the tech industry goes bust, and the Zuckerbergs and others lose all their money. Those folks are paying cash for those homes, so high as the prices are, these people in tech largely are paying out of stock profits.

That is the type of “bubble talk” that you hear during a bubble. The tops of bubbles are impossible to predict but the Bay Area pricing is pretty clearly in a bubble fueled by easy money. The stock market is pretty much at an all time high and mortgage interest rates are still near historic lows. When either of those end it will not be pretty.

While some people do pay cash for a home there is it less common than you might be assuming. You can look up the percent of homes that don't have a mortgage on the census web site. For example in Sunnyvale, where I once lived, only about a third of the homes don't have a mortgage. That is not much different than the national average.

Something to remember is that when people make a "cash" offer to buy a house what that really means is they are making an offer without a financing contingency that would allow them to get their earnest money back if they can't get a mortgage. They are still free to get a mortgage and even if they pay cash when the house sales closes they may still get a mortgage a month latter.[/quote]

I made the comment knowing it would provoke this response, and sure it is over the top, but I think the OP's fear of a bubble is a mistake.And my point about the Bay Area is that, sure, if you are chasing values, buying with leverage in hopes of selling higher, that is crazy. But if you can afford the financing with your job, or if you have the cash ( I mean real cash, not contingency cash) and plan to stay in the property for years, and you want to own the property, then you buy and hold. Timing the real estate market is similar to timing stock purchases, although with stocks you can do the much mocked DCA to feel better about going in. But in the end, high value areas cycle, bubbles break, but the properties always return and surpass the bubble prices, especially in areas where international money (aka sweat shop owners) want to park their cash forever.

One metric you can check is a website called (I think) Greatschools.com, It will give you the test scores of the nearest neighborhood public schools over time.

Great indicator of the direction your potential new neighborhood is headed.

Here, those numbers have been heading south real fast - but because we did the private school thing, quality of education was not an issue.

Kid is off to college now and 3 active shootings down the street this summer. Wife is kinda thinking of moving. I'm neutral so far. All our married friends with young kids - ALL of them - have fled for other cities.

Live in the best neighborhood you can afford. If you must rent then do it. When you sign your next contract put a max on rental increase. Say 3% max. This way no great rate increase.

If you buy in a bad neighborhood those are the kids your kids will play with. And a bad neighborhood only gets worse over years. When you rent you can just leave.

Also, if you are a stay home mom, when your kid get ready to go to school full time, maybe you can work while they are in school. This way more income better place to live. But not at the expense of the kids. Kids need mom.

Private school is expensive. You can put that money towards a better place to live and better schools.

Most sketchy neighborhoods DON'T gentrify, but you could get lucky. If it were my young family, I'd rent, build assets, keep looking. I'd rather own a very small home in a good neighborhood than any home in a bad neighborhood.

There are no risk free decisions. The choice you describe here is between financial risk and physical risk. Your call, trust your gut.

Last edited by white_water on Sun Jul 16, 2017 6:18 pm, edited 2 times in total.

staythecourse wrote:Real estate is not a difficult to figure out. What folks will want is: Safety, Good schools, close to public transport, and green space. That simple. So even if you don't care about safety or public schools it may come back to haunt you when you sell.

I really don't think it's that simple at all . If you want to live in a crowded city, yes. Not everyone does. We don't have close neighbors - there are plenty of deers, cats, skunks and some raccoons , though.

I bought in a neighborhood that is fairly safe, but have to drive through one of the less safe parts of town every day to get there. There are homicides down there once in a while at ground level about 2 miles away. We rarely shop in that part of town even though those are the closest businesses to home.

We don't regret the decision at all. But we don't have kids. I have not been able to find broken statistics by zip code in terms of crime - San Jose is a very safe city overall, our zip code is just known to be one of the worst ones, but it's a very large zip.

The home is in the hills and there is zero public transport within 1.5 mile, and downhill, which is impractical to access (the walk back uphill would be infeasible at 15% grade). That's one thing I wish we had, but it's not very realistic that government could meet this need, unfortunately. Everyone around here has to have a car.

The schools are renowned to be the worst in the Bay area - so nowhere to go but get better, right ? We don't have kids and won't ever adopt any so we don't care.

The home has roughly doubled in value since 2010 (admittedly, good timing buying then). We're talking almost a million dollar increase. We are not tapping the home equity, though.

There is a county park not too far, but not within walking distance, everything is spread out around here and driving distance only. Can't speak for the smaller closer parks as I never visited any - again the steep hills are not conducive to walking. I think I have walked twice in my neighborhood in seven years.

runner540 wrote:There is so much more to a neighborhood and house than statistics. Have you and your spouse visited the neighborhood at all different times/days of the week? Do you know others who live there, or any local police officers who can give you some on-the-ground data? I think this is a question that statistics can't answer for you. Do you and your family feel safe? Can the kids actually use the yard?

1. I suspect that some degree of crime statistics in some areas may not accurately reflect your actual risks.

2. The direction of the crime risk may be important. Maybe the applicable crime risks for you are getting better (or worse).

3. Can you find way(s) to buy in the existing "safe" neighborhood?

We know families that have lived there for decades. It was a nice quiet suburb in the 1960s. Mostly retirees that we know, or nearing retirement. Though many of them have had no issues, they still live there advise they would avoid buying in the area.. The housing crash and investors are mostly blamed, since they bought rentals for cash when the banks were unloading houses for $20k each. This lowered the barrier for residents of the neighboring "war zone" to move in and rent or buy as well. An uncle of mine had a nice house on one of the nicest streets, bordering a very nice suburb. It sold for $145,000 in just 4 hours on the market 2 years ago.

We can't afford to buy in our area if we want to live beneath our means.

Oh, no. Oh, he** no. If you are considering homeschooling, then you should be looking at a neighborhood with diversity, sidewalks, neighborhood stores with employees who love on your kids, small businesses, retirees sitting on benches sharing their views of the world. And especially with a special needs child, your DW does not need environmental stress.

Keep renting where you are, or possibly figure out how to buy, but:

If you are in a family association for children with similar needs, or if you do finally get your 3-year-old into "the system", you may find that neighborhood X, not currently on your radar, may be where you want to wind up. If you just continue to rent, you can remain light on your feet and find a good home where your family can blossom. In the meantime, you won't be living in fear with a mortgage anchor around your ankle.

Best wishes to you and your family.

The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

staythecourse wrote:Real estate is not a difficult to figure out. What folks will want is: Safety, Good schools, close to public transport, and green space. That simple. So even if you don't care about safety or public schools it may come back to haunt you when you sell.

I really don't think it's that simple at all . If you want to live in a crowded city, yes. Not everyone does. We don't have close neighbors - there are plenty of deers, cats, skunks and some raccoons , though.

I bought in a neighborhood that is fairly safe, but have to drive through one of the less safe parts of town every day to get there. There are homicides down there once in a while at ground level about 2 miles away. We rarely shop in that part of town even though those are the closest businesses to home.

We don't regret the decision at all. But we don't have kids. I have not been able to find broken statistics by zip code in terms of crime - San Jose is a very safe city overall, our zip code is just known to be one of the worst ones, but it's a very large zip.

The home is in the hills and there is zero public transport within 1.5 mile, and downhill, which is impractical to access (the walk back uphill would be infeasible at 15% grade). That's one thing I wish we had, but it's not very realistic that government could meet this need, unfortunately. Everyone around here has to have a car.

The schools are renowned to be the worst in the Bay area - so nowhere to go but get better, right ? We don't have kids and won't ever adopt any so we don't care.

The home has roughly doubled in value since 2010 (admittedly, good timing buying then). We're talking almost a million dollar increase. We are not tapping the home equity, though.

There is a county park not too far, but not within walking distance, everything is spread out around here and driving distance only. Can't speak for the smaller closer parks as I never visited any - again the steep hills are not conducive to walking. I think I have walked twice in my neighborhood in seven years.

That doesn't prove any point at all. What is the rate of increase in value of the houses in safe areas in the San Jose area? If your's has doubled then my guess those areas have increased SIGNIFICANTLY more.

It is common sense. Why would anyone choose to buy in unsafe area IF they can afford to buy in a more "desirable" area? Most folks who are spending a wad of cash on housing are not choosing to by gritty to just to feel urban and/ or risk feeling unsafe due to criminal elements.

I'm not saying it is not possible for unsafe areas to appreciate, but go ahead and ask 10 people you know who are currently buying and they will ALL say they prefer safe areas vs. unsafe areas.

Maybe your area attracts buyers since the lots are bigger SINCE it is in a less desirable area. If it was more desirable then developers would be buying these huge lots and subdividing them to smaller lots and selling them off.

Good luck.

"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” |
-Jack Bogle